What is a HMRC tax investigation?

HMRC can randomly select a tax audit into any business and ask to see their yearly accounting and tax returns to determine that these are being completed correctly and that the correct tax is being paid.  If HMRC do contact you, via phone call or email, they will ask to see either, your accounts and tax calculations, Self Assessment tax return, company tax returns and VAT records, if you are registered.  

If you use an accountant they may have been contacted first but if they haven’t you need to arrange a meeting immediately.  Some accountants may seek specialist tax advice from a Chartered Tax Advisor (CTA) or a qualified tax investigation team to work alongside their client to provide a more knowledgeable understanding and achieve the best results.  Tax Advisory UK have a number of affiliate accountants that we work closely with to always get the best results.

Different types of HMRC Tax Investigations 

A HMRC tax audit or investigation may be more likely if you are VAT registered or your employees are being paid through Pay As You Earn (PAYE).  HMRC can conduct 3 types of audit on your business:

Full enquiry

A full enquiry from HMRC will investigate the complete business books and records of a company.  All individual or accountants financial accounts will be scrutinised by HMRC to assess whether there are any errors and the income and expenses have been declared to the best of the companies knowledge.  HMRC may ask to meet with the company directors and accountants for a face-to-face meeting and Tax Advisory UK will always recommend that there is a qualified tax specialist present in this meeting.

Aspect enquiry

Aspect enquiries generally specify a certain entry of the corporation tax return that may be investigated.  These are quite common and straightforward and the HMRC will have specifics for a company to produce the accounts relating to this.

Random check

HMRC can randomly ask to check business accounts at any time.

During a Tax Investigation

When HMRC are conducting an investigation they could delve into the company’s VAT, corporation tax, income tax, capital gains tax (CGT) and all taxes to check for errors or misconduct.  They can ask to go back 20 years in your company tax returns to check for any errors.  They will ask for all documents and explanations on why you used the figures that have been submitted in your tax returns and if all your records have been saved and processed correctly then this can be shared with HMRC to speed up the process.

If you are asked to attend a meeting with HMRC to explain your case then you are not legally obliged to do this but in doing so can result in a better understanding between all parties involved and it may be easier to express yourself better than by sending letters.  Tax Advisory UK strongly recommends that you have a tax specialist present and you should engage with one immediately so it is left to qualified professionals to help you.

Concluding a HMRC Tax Investigation

If the company being investigated and their representatives feel all of the documents and accounts have been submitted to HMRC but the investigation is still ongoing, you can ask for a First-Tier Tax Tribunal.  This can prompt HMRC to conclude the investigation if the full records submitted are deemed to be justifiable with no grounds to continue the investigation.

HMRC will notify the company that the investigation is over and tell you whether the tax returns submitted have been accepted.

If any discrepancies are found by HMRC within your tax return but decide you have not been negligent, they will write to tell you how they think your tax return needs to be corrected. 

If HMRC believes you are guilty of neglect or fraud, they will charge penalties, extra tax and interest.  They can ask for contract settlement so all parties agree on a sum to be paid to cover all HMRC tax, interest and penalties.  Tax Advisory UK strongly recommends that a qualified tax specialist is present when signing any documentation with HMRC.

If you feel the settlement sum is too high and you can not agree on this with HMRC then you are entitled to make a complaint.  

The HMRC can then conduct an ‘internal review’ which is where a different tax inspector who has no involvement with the original case can look through your case and could give a different verdict.  If you still disagree then you can take the matter to the First-Tier Tax Tribunal.

Tax Advisory UK can cover:

• HMRC Compliance Checks
• HMRC Tax Investigation
• Tax Fraud Investigation
• HMRC Fraud Investigation Services (FIS)
• Code of Practice 9 Investigation – COP 9
• Code of Practice 8 Investigation – COP 8
• Contractual Disclosure Facility – CDF
• Disclosure of undeclared Income
• Worldwide Disclosure Facility
• Let Property Campaign
• VAT Investigation
• Criminal Tax Investigation
• Representation at HMRC meetings
• Representation at First Tier Tax Tribunal
• Representation at Upper Tax Tribunal

Contact Tax Advisory UK today and we will arrange a meeting with some of the UK’s most qualified and experienced Tax Investigators to help with all tax investigations.  Please call 07908 074954.